Market Overview

Do We Really Need These ETFs?


In a world where total products now number above 1,200 and assets under management reside north of $1.1 trillion, the exchange traded products business is anything but perfect. For the most part, ETF issuers have done a fine job of bringing new funds to market that investors respond well to.

Of course that is key because weak volume plus weak AUM is a toxic brew that leads many ETFs to the exchange traded products dumpster, graveyard or another unsavory metaphorical destination.

Simply put, with over 1,200 ETF and ETNs on the market today, there are a few turkeys. Here's is the ETF Professor's list of ETFs we can do without, in no particular order and with no preference given to issuers.

1) First Trust Nasdaq ABA Community Bank Index Fund (Nasdaq: QABA): QABA made its debut in July 2009, probably not the best time to bring an ETF to market that tracks financials. Thinking that QABA's timing in terms of debut is a factor in its poor statistics is just speculation, but we know this much: QABA has less than $14 million in AUM and trades just 3,333 shares per day.

2) ELEMENTS Global Warming Index ETF (NYSE: GWO): Maybe GWO would be a viable ETF if Al Gore resided in the White House. Alas, he does not and GWO is plagued with less than $3 million in AUM. That's not good for an ETF that is over three-years old.

3) PowerShares Dynamic Insurance Portfolio (NYSE: PIC): The insurance business just isn't dynamic enough for multiple ETFs (pun intended). While PowerShares has plenty of interesting ETFs among its vast lineup, PIC isn't one of them and the ETF has not proven to be a viable rival to the SPDR KBW Insurance ETF (NYSE: KIE). Approaching its sixth birthday, PIC has just $9.44 million in AUM.

4) WisdomTree Dreyfus Japan Yen ETF (NYSE: JYF): Another fine example of what happens when two ETFs try to serve the same niche and one fails miserably. JYF has average daily volume of less than 2,500 shares. On the other hand, the CurrencyShares Japanese Yen Trust (NYSE: FXY) has average daily volume of over 267,000 shares.

5) PAX MSCI EAFE ESG Index ETF (NYSE: EAPS): ESG stands for environmental and social governance, meaning EAPS is a play on the slippery slope of socially responsible investing. That kind of makes one wonder why coal and oil names can be found among the fund's holdings. EAPS is not a pure equity play as 20% of its assets can be invested in derivatives instruments. EAPS has been around for 16 months and has less than $3 million in AUM.

Posted-In: News Sector ETFs Short Ideas Specialty ETFs Currency ETFs Pre-Market Outlook Intraday Update Markets


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